International Marketing Management Chapter I A International

International Marketing Management Chapter I

A. International Business and Marketing * Transactions carried out across national borders to satisfy objectives of individuals, companies or organizations is called International Business. -- Business (domestic or international ) comprise of a number of functions like manufacturing, marketing, procuring, finance, HR, finance, R&D etc. when one or more of these functions are carried out beyond the home country, it is called International Business. 2/8/2018 Presentation by Prof. H. Ganguly 2

Types of International Business mit 1. International Trade ( Foreign Trade ) -- Comprises of imports and exports i. e. , buying and/or selling products and services abroad to fulfill needs and objectives of company. 2. International Investment – When a company applies capital beyond home country for production and/or other functions to earn profit, it is called International Investment. 3. International Marketing -- When a company identifies and fulfills need and wants of customers abroad through suitable products or services at profit for company, it is called International Marketing. 2/8/2018 Presentation by Prof. H. Ganguly 3

Role of International Business / Marketing * International business puts an end to economic isolation of nations, thereby improve national income and standard of living. * It facilitates mobility of ‘factors of production’ excepting land it opens up competition. * Like Janus (the two faced Roman God), international business deliver opportunities and benefits out of imports and exports to nations. 2/8/2018 Presentation by Prof. H. Ganguly 4

B. Silk Route trade to Globalisation -- Selling and buying of goods beyond national frontiers is thousands of years old. From India, clothing, silk, spices etc. used to be traded with Egypt, Persia, Rome from more than five thousand years -- Trading between India, China, Rome, Greece etc. were established before Christian era which was the major reason of their prosperity in those days. -- World trade and investments gradually assumed increasing proportion to the betterment of national income and living. -- Finally in last century, appeared multinational corporations in the scene carrying out manufacturing, marketing and other functions in nations globally. 2/8/2018 Presentation by Prof. H. Ganguly 5

Paradigm shifts -- From latter half of last century international business underwent major changes when large companies from U. S. , Europe, Japan started expanding their operation beyond their home countries. -- These companies started identifying needs and wants of customers in different nations and then provided them with suitable products and service to satisfy; known as multinational approach by firms like IBM, GM, Bayer, Unilever, Toyota, Suzuki etc. -- Next, with advent of newer technologies in telecom, transportation and travel, national markets started integrating with each other, thus same products and services started finding their way into different country markets called 2/8/2018 6 globalisation. Presentation by Prof. H. Ganguly

These trans-border transactions came to be segregated as : International Trade -- When products, service, technology, capital etc. flow across national borders for profit, it is called international trade with orientation called ethnocentric. International Marketing -- When company’s objective is to satisfy customers ‘needs and wants’ at profit, it is called international marketing; it embraces polycentric orientation e. g. MNCs like Ranbaxy, HLL, Samsung, Petronas etc. Global Marketing -- A global company standardises its marketing mix elements as far as possible to deliver maximum value to customers. It treats whole world as a single market e. g. , Harley Davidson, Sony’s Walkman, Walmart etc. Orientation of Global companies is mixed of ethnocentric and polycentric orientation. 2/8/2018 Presentation by Prof. H. Ganguly 7

Glocal Operations -- Global companies are increasingly adopting structure and strategies to suit global operations for greater value addition for customers all over but with focus on local environments, in order to maximise satisfaction of those local customers. -- For example, Nokia is marketing mobile handsets in India that provides SMS facility in Hindi and other Indian languages at competitive prices. -- Of course it increases marketing and other operational complexities for company. -- Strategy of these companies is to ‘Think Global but Act Local’ so called Glocal. 2/8/2018 Presentation by Prof. H. Ganguly 8

C. Opportunities & Challenges of International Marketing -- It is well known that international business creates wealth for individuals, companies and nations. Formation and also decline of Roman empire was linked to international business. Rise of British empire to eminence in nineteenth and decline in twentieth century was again due to international business. Opportunities -- Firms go global broadly because of TWO reasons : 1. Pull Factors -- it comprises of proactive reasons that pull the firm to foreign transactions for * Profit -- Generally international marketing is more profitable compared to domestic. * Top-line Growth -- At times of domestic recession, foreign sales keeps company going. 2/8/2018 Presentation by Prof. H. Ganguly 9

* Economy of Scale in operations. * Spreading of risks -- Foreign markets reduce dependence of firm on domestic market, as China is thriving now on U. S. and Europe market. * Uniqueness of product or service -- Unique attributes may offer enormous opportunity and very less competition abroad, e. g. Indian herbal medicines, Chinese Tiger-balm etc. * Stage in lifecycle * Cheaper cost of factors of production -- like cheap raw material, labour, land etc. 2/8/2018 Presentation by Prof. H. Ganguly 10

2. Push Factors -- drives the firm to explore opportunities like * Home & Host Govt. Policies – Tax benefits, subsidies etc. * Spin-off Benefits – Success in foreign markets boost company’s image in home market, also helps in introducing newer products and services with enhanced brand image. * Sharing of R&D costs -- MNCs can embark into ambitious R&D projects compared to single-country companies as their research expenses are shared between various country markets * Competition -- Intense competition in home markets push companies out to markets abroad. 2/8/2018 Presentation by Prof. H. Ganguly 11

Challenges -- Difference in environment, competition, national income etc. give rise to formidable challenges in international marketing * Political and Legal challenges – Generally political and legal framework differs from country to country so marketing approach is required to be tailored accordingly. * Cultural Environment -- Behaviour pattern, liking and disliking of customers differ from nation to nation, these are to be accounted in assorting marketing mix elements. * Economic Environment -- Marketing strategy at host country should be designed keeping in mind host markets’ nature of economy, scenario and other policies. 2/8/2018 Presentation by Prof. H. Ganguly 12

* Demographic and Technological Factors -- Population, its growth rate, composition and level of technological advancement influences marketing strategy in host nations. * Business Infrastructure -- Availability of suitable banking system, stock exchanges, market research & advertising agencies, intermediaries are to be viewed in advance. * Money and Monetary System – Exchange rate of currencies, its perpetual fluctuation offer major challenges in marketing planning. * Logistic Support System -- Availability of transport, its cost, time, warehousing , inventory management and their expenses are matters of serious concern. 2/8/2018 Presentation by Prof. H. Ganguly 13

D. Internationalisation of Emerging market trades -- Business operation of firms both in philosophy and style undergo change as those emerge to occupy salient positions in global trade. -- Their focus and strategy changes in specific stages as under Stage I -- Domestic Companies -- Majority of companies start operation in their home country. Their focus, vision and activities remain limited. -- These companies focus upon domestic market, domestic supplies and domestic competitors. -- Mindset of these companies is ‘If it is not happening in home country , it is not happening anywhere, neither it is worth happening’. It is called ethnocentric orientation. 2/8/2018 Presentation by Prof. H. Ganguly 14

Stage II -- International Companies -- On being attracted by opportunities abroad or otherwise, these companies then extend one or more of their functions like marketing, procurement, manufacture etc. to foreign countries to provide greater value to customers. Thus it becomes a second stage International company. -- But the company adopts same products, policies and strategies as they follow in their home country. -- Its orientation continue to remain ethnocentric. -- So for all practical purposes, International operations are extension of domestic operation. 2/8/2018 Presentation by Prof. H. Ganguly 15

Stage III – Multinational Companies -- Next the company identifies difference in environments and demand pattern in host countries. -- So learns to change their approach, marketing mix elements and strategies to satisfy different country customers. -- Thus company’s overall strategy comprises of a collection of individual strategies called multidomestic approach. -- This type of operation is called Multinational operation. Mindset of company also changes to Polycentric orientation. -- “Multinational companies respond to different environment in host countries and evolve different strategies to deliver satisfaction to customers at profit. 2/8/2018 Presentation by Prof. H. Ganguly 16

-- That is why, Mc. Donald’s market Mc. Alu Tikki in India in place of Big Mc with beef or ham as in U. S. and Europe. -- MNCs view the World as coglomoration of markets which individually are different. So MNCs make strategy for each nation as necessary. -- That is, MNCs assort marketing mix elements like product (service), price, path and promotion in a manner to satisfy local customers. -- Overall strategy of MNCs is to generate competitive advantage over other players through: • Manufacturing at lowest cost • Differentiation of product (service) from competitors • Evolving and exploiting market protection. 2/8/2018 Presentation by Prof. H. Ganguly 17

Stage IV – Global Companies -- Next, the company attempts to add greater value to their product or service for enhanced satisfaction to customers. -- By focusing on either global sourcing or global marketing approach but not both. It is referred to as Global Operation. -- So, Global companies try to satisfy customers located all over globe by sourcing products from home country. As is done by Sony’s Walkman or Harley Davidson motorcycles. -- In the process, Sony or Harley Davidson introduce benefits of ‘Economy of Scale’ leading to low cost manufacture at one location at Japan or U. S. , compared to competitors. 2/8/2018 Presentation by Prof. H. Ganguly 18

-- Similarly, Walmart procures value-added products from all over world to provide greatest satisfaction to US customers at lower price through more than 13000 retail outlets by harnessing global sourcing & logistics strategy. -- In Global companies, key activities are ‘logistics and marketing or sourcing’. The suppliers and customers maintain a “hub and periphery” relationship among themselves. -- Orientation of Global companies is mixed of ethnocentric and polycentric mindsets. 2/8/2018 Presentation by Prof. H. Ganguly 19

Stage V – Transnational Companies -- Next, companies integrate global resources with global markets at profit carried out through transnational operation without consideration of national borders. -- Philosophy of a Transnational company is “to add best value to product or service by using resources from wherever those are best and economical globally so as to provide greatest satisfaction to customers universally”. -- For example, News Corporation (I) Ltd. (Star TV of Rupert Murdoch), Caterpillars Ltd. and most of automobile giants are shifting from MNC to the TNC way. -- Orientation of TNCs is Geocentric i. e. ‘vasudaiva kutumbakam’ meaning that ‘whole world is my family’. 2/8/2018 Presentation by Prof. H. Ganguly ----- 20